Fueled by the pandemic, in 2020 peer-to-peer (P2P) money transfer services like Venmo, Zelle, and Cash App saw unprecedented growth. In fact, by the end of 2023 it is expected that $1.152 trillion will transact via mobile P2P apps. Despite the convenience that these apps provide, most users are not aware of one large drawback.

P2P platform’s original purpose was to make it easy for friends and family members to pay each other. They have, however, begun to be used more widely. People are using P2P apps to pay their babysitter, the barber, or when purchasing a used car through an online marketplace.

It is easy to see why. Payments happen in just a few clicks. When they want to pay users type in the recipient’s mobile number or email address and then authorize the payment.

A Looming Concern 

While the convenience of P2P payments is clear, we think there’s a big wave of fraud and disputes on the horizon. Why? Because, most of these services currently offer no dispute-resolution process or consumer protections. This means people risk losing their money if something goes wrong — such as someone not receiving the promised good or service or a payment mistakenly being sent to the wrong mobile number.

When using a P2P money transfer service, Person A uses the app to pay Person B. Person A asks the P2P app to remove money from their account and send that money to Person B.  If Person A is using the app to pay for merchandise and Person B never sends the merchandise, the P2P app is not responsible.

In this case, the P2P app did exactly what Person A asked. They took the money and gave it to Person B. The P2P holds no responsibility for the part of the deal that Person B was supposed to uphold.

Fraudsters Know This and Are Taking Advantage

At WECU, we have heard of many instances of fraud where P2P cash apps where used. Sadly, there is nothing we can do. WECU works with Visa for our debit and credit card transactions. When a member’s card information is stolen and used to make unauthorized purchases, WECU works with Visa to dispute the claim.

This is where the Electronic Funds Transfer Act (passed by congress in 1978) and the Federal Reserve board Regulation E come in. These provide certain protections to members personal checking and savings accounts when electronic funds transfers occur. P2P transfers through apps like Cash App, Apple Pay, Venmo and Zelle are not covered.

Sometimes P2P Payments Can Be Cancelled

If you use a P2P app to send a payment most of the time it is immediate. If the person doesn’t have an account, it is possible for the payment can be pulled back.

How Can You Protect Yourself?

There are a few ways you can protect yourself.

  • Only send money to people you know.
  • Don’t use these apps for business transactions.
  • Keep the app updated to be less susceptible to hackers.